Question

3. In Owl Company’s Annual Report, which of these financial statements show their 3 comparative years, one on top of another (top to bottom), not in side-by-side columns? a. Statement of Stockholders’ Equity b. Statement of Financial Position c. Statement of Cash Flows d. Statement of Income e. All of these financial statements show their comparative years in side-by-side columns.

At year-end, the following information is available from the Fox Co. Adjusted Trial Balance (Accounts are in random order, but assume Normal Account Balances):

         Equipment                      $200,000                   Accumulated Depreciation    $ 100,000

           Accounts Payable               80,000                   Cost of Goods Sold             120,000    
Loss on Truck Sale            20,000                    Depreciation Expense         40,000

           Dividends                          70,000                   Cash                                              10,000
Salaries Expense               60,000                    Sales                                          650,000
Retained Earnings            140,000                   Accounts Receivable         120,000

Based on this info, what is Fox’s Net Income for the year?

a. 310,000                b. 410,000                c. 340,000             d. 430,000      

Answer 1

Since we have been given various account balances from Fox Co. Adjusted Trial Balance , we are required to compute the Net Income for the year.

Income Statement for Fox Co. For the year ended ……
Revenue           Sales                                  $650000	$650000
TOTAL REVENUE (A)                $650000
Expenses        Cost of Goods Sold                $ 120,000   Loss on Truck Sale                 $ 20,000        Depreciation Expense            $ 40,000        Salaries Expense                   $ 60,000	$240000
TOTAL EXPENSES (B)              $240000
NET INCOME (A-B)	$410000

NOTE : Income statement is one of the components of Financial statements that is used to compute the net income/ loss earned by the Company over a specific period of time i.e accounting period. It takes into account all the incomes whether operating or non operating earned during accounting period &  all the expenses whether operating or non operating incurred during accounting period

2) Since Equipment, Cash, & Accounts receivable are assets not expenses, while as Accounts payable is liability . therefore they are not taken in the income statement, but are items of Balance Sheet.

3) Accumulated depreciation represents the total amount of allocated cost of the asset to Depreciation expenses. It is used to determine the book value of the asset, hence it is also a Balance sheet item

4) Retained earning & Dividend are appropriations of profit has not included in determination of income of the year.